You can claim state subsidies for the purchase of a property. This is generally possible regardless of the location and size of the property. In recent years, Germany has seen a steady rise in real estate prices. This means that you can expect high costs if you are planning to become a homeowner. This applies equally to the purchase of a property and to a new build. As a normal earner, you are generally not in a position to finance the purchase of a property or the construction of a house from your own capital. You are reliant on borrowed capital in the form of a loan. If you take advantage of state support in the form of subsidies, you can reduce the bank loan and thus reduce your overall debt burden. In our article, we provide you with an overview of the government grants available. Please note that this is purely an informative article. Expert advice for your individual financing is nevertheless necessary.
Please note: All information provided here is without guarantee and this article does not constitute binding advice. For detailed information on your individual circumstances, please consult your expert.
Why does the state promote the purchase of real estate?
You can take advantage of a state subsidy when buying a property. One of the reasons for granting the subsidy is that home ownership serves as a retirement provision. As a rule, you pay off the loan for your property by the time you retire. This means that you do not have to pay rent in old age and can close part of the pension gap in this way. The state wants to provide support here and focuses on the group of people who need this help in particular. These are primarily young families and those who only have a low income. This is realized against the background of the welfare state principle. In addition, you can claim subsidies for improving the energy efficiency standards of existing buildings and for the use of renewable energies. The state hopes that this will have a steering effect: The more owners opt for energy-efficient refurbishment, the more successful climate protection will be.
What state subsidies are available for real estate purchases?
You receive state subsidies if you buy an existing property or if you decide to build a new one. There are very different state subsidies for this. A distinction is made between subsidies for the general public and state aid for specific target groups. These can be employees, young families or single parents. In this article, you will find out which subsidies you can apply for from the federal government. It doesn’t matter which federal state you live in. You also have the option of applying for funding under the support programs of the federal states. The state’s own development bank may be responsible for these development programs. Alternatively, you can contact the city or district administration responsible for you for further information. Please note that the federal states also have special subsidy programs for families who wish to purchase residential property.
KfW funding for real estate purchases
KfW Bank offers various subsidies for real estate purchases. Formerly known as Kreditanstalt für Wiederaufbau, KfW Bank is now owned by the German government. It is an important point of contact if you want to buy residential property.
KfW Home Ownership Program
As part of the KfW home ownership program, you can obtain a low-interest loan for long-term financing for the purchase or construction of a property. Your income and marital status are irrelevant for approval. To qualify for the loan, you must want to build or buy the property in order to live in it yourself. If you meet this requirement, you can apply for a subsidy.
You have two options for drawing down the loan:
+ Annuity loan with a term of 4 to 25 years
+ Term loan with a term of 4 to 10 years
A prerequisite for the granting of the loan is that it is secured in full by an entry in the land register.
* Combination with other subsidies possible
You have the option of combining the KfW Home Ownership Program with other subsidies. These include funding opportunities that you can receive as part of a renovation or modernization project. This gives you the option of increasing your total funding amount.
* Promotion of energy-efficient renovations
KfW Bank not only promotes the purchase or new construction of real estate. You can also take advantage of subsidies for energy-efficient renovations. This applies in particular if you decide to use renewable energies or convert your property to make it suitable for the elderly. You can also receive a subsidy if you buy an electric car and want to install a charging station at your home or at a privately used parking space. If you are planning to buy and renovate an older property, these combination grants can be helpful for secure financing. You can take advantage of the subsidies regardless of where you live in Germany.
KfW funding: How much funding is available?
How much funding is available if you want to take out a KfW renovation loan? If you are planning to buy or build a new property, KfW funding under the home ownership program is the right choice for you. You can get a loan for the total costs. You will be granted a maximum of EUR 100,000. If the amount for the construction or purchase of the property is higher, additional financing is required. If the property is cheaper, you can pay the entire amount with KfW funding.
* Purchase of cooperative shares
If you would like to purchase cooperative shares for an owner-occupied apartment, you can obtain a loan of up to EUR 50,000.
* KfW Efficiency House
The KfW provides funding of up to EUR 120,000 for refurbishment to improve energy efficiency. Individual measures to improve thermal insulation can be funded with up to EUR 50,000.
How do you get the KfW subsidy when buying real estate?
As KfW Bank does not have any branches, you must look for a financing partner during the planning phase. This could be a bank, an insurance company or a building society. You apply for the loan via the chosen financing partner. You conclude the financing contract with this partner. Once you have received approval from KfW Bank, you can conclude the purchase contract or start the construction work. You repay the loan via your financing partner.
Residential Riester subsidy for the purchase of condominiums
Another state subsidy that you can take advantage of when buying real estate in The second option you can take advantage of is Wohn-Riester. Please note that this subsidy can only be granted if the property is owner-occupied. Wohn-Riester is a measure that belongs to the area of additional private pension provision. An alternative term is “owner-occupied pension”. The aim of this measure is rent-free living in old age. The prerequisite for the subsidy is that you plan to use the property yourself in the long term. You can use the subsidy to repay the loan or to save capital for home ownership.
* Certified Riester loan
By opting for a certified Riester loan, you can speed up the process of paying off your home. You benefit from allowances and tax advantages similar to the Riester pension. You can take advantage of these benefits as a builder and buyer of a property. If you have a Riester savings contract, you can use it for construction financing. You will only receive the subsidy if you take out a building savings contract or a Riester building loan. The support is included in the respective contract. The modalities are sometimes not so easy to understand, but you can save several thousand euros. Please note, however, that you will have to pay tax on the subsidy when you retire. You are entitled to the subsidies if you are compulsorily insured in the statutory pension insurance scheme.
* Use for a property is mandatory
You can only claim the Riester subsidy if you are buying or building a house or buying an apartment with the aim of living in the property yourself. If you live in the property yourself and have taken out financing or are planning to buy a cooperative apartment, you are also eligible for the subsidy. The same applies if you want to convert your home to make it suitable for the elderly. The subsidy is particularly worthwhile for families with children, but also for higher earners. Please note that you must have paid the subsidy by the time you reach retirement age.
How high is the subsidy for Wohn-Riester financing?
To receive the subsidy, the first step is to take out a certified Riester loan. You can get this as a property buyer, but also for a new build. Similar to the Riester savings contract, you receive annual allowances which are used to repay the loan. The amount is EUR 175 per year. The prerequisite is that you pay four percent of your gross income subject to social insurance contributions from the previous year into a Riester savings contract. You can deduct the allowances for the building society savings contract from the amount determined. The maximum amount is EUR 2,100. For children born before 2008, there is a bonus of EUR 185. Children born later receive EUR 300. Career starters up to the age of 25 can claim a one-off bonus of EUR 200.
Documents for the sale of condominiums: Enclose proof of renovation
The documents that are handed over to the buyer when a condominium is sold include evidence of renovations and modernization work. These documents provide important information about the condition of the building. If the building or the apartment itself has recently undergone refurbishment, this will have a positive effect on the purchase price. You can ask a higher price for a condominium that meets modern standards.
How do you get the Wohn-Riester subsidy?
The refurbishment certificates provide the buyer with important information about the work that has been carried out in the various areas. They can use the documents to decide which modernization work they would like to carry out themselves. You also have the opportunity to use the documents to show what you have invested yourself in order to maintain or improve the condition of the condominium. The renovation certificates therefore provide very important information for the prospective buyer and should therefore always be included in the documents for the sale of the apartment.
Documents for the sale of condominiums: Building insurance certificates are important
If you are interested in the Wohn-Riester subsidy, you can obtain a corresponding offer from your bank, but also from credit brokers and building societies. You pay the aforementioned portion of your income into the Wohn-Riester contract and can receive the subsidies from the state. You can claim the amount paid in against tax.
Building subsidy for condominiums
You can claim a building allowance for the purchase of an apartment or house that you want to live in yourself. You will also receive this money if you buy an apartment that you previously rented. You can claim the Baukindergeld for each child living in your family. It does not matter how many children you have. The prerequisite for claiming is that the children have not yet reached the age of 18 and that they are registered as your main residence in your household. As the subsidy is linked to child benefit, only families and single parents can claim it. The BMI (Federal Ministry of the Interior, Building and Community) is responsible for funding. Payment is made by the KfW Bank.
Further requirements for receiving the building subsidy:
+ The property must not have been purchased before the cut-off date of 01.01.2018 (date of purchase contract or building permit)
+ The property must be located at a German address
+ You must not have any other residential property in Germany
+ You must not earn more than the specified income limit: EUR 90,000 household income with one child, each additional child increases the income by EUR 15,000
The subsidy is aimed at young families with low or medium incomes and single parents who only have a small amount of equity. They do not have to repay the subsidy.
How much is the child building allowance?
The amount of the building child benefit is EUR 1,200 per child and year. The maximum term is ten years, so you can claim up to EUR 12,000 per child. But when does the child have to be born in order to claim the Baukindergeld? You will only receive the subsidy for children born before the application is submitted. Unfortunately, other children cannot be considered.
How do you get the building subsidy?
When can you start applying for the building subsidy? It is important for you to know that this measure is limited in time. Originally, the Baukindergeld subsidy expired on 31.12.2020. Due to Corona, there is an extension of the deadline, which was granted for a period of three months. The deadline is now 31.03.2021. You must have received your building permit or purchased a property by this date. Then you can receive the Baukindergeld. Please note that you must submit the application within six months of moving in. The application is made online in the KfW grant portal.
* Requirements for successful application
If your application for a building subsidy is to be approved, you must meet the following requirements:
* All members of the household must be registered with the police in the new property at the time of application (confirmation of registration)
* When purchasing a previously rented apartment, the date of the purchase agreement applies
* Please submit the income tax assessment notice, the land register extract and the purchase agreement or building permit as documents
* Applications can be submitted until the end of 2023
Use the housing construction premium as a state subsidy when buying real estate
Another option for state support is the housing construction premium. What does this mean and what is this premium for? The housing construction premium has been around since 1952. The aim is to save equity for the purchase or construction of a property. This support measure cost the federal government EUR 162.1 million in 2018. In addition to the purchase or construction, renovation measures are also subsidized. You receive the housing construction premium if you pay contributions to building societies or contributions to savings contracts. The first purchase of shares in building and housing cooperatives is also subsidized. The main requirement for receiving the housing construction premium is that you use the money to build, buy or renovate owner-occupied residential property. For example, if you take out a building society savings contract, you can receive the housing construction premium.
* Note earmarking
The housing construction premium is subject to earmarking. For example, if you have the balance saved from your home loan and savings contract paid out before the end of the vesting period of seven years, you will not receive the premium. The same applies if you assign or lend the claims.
* Requirements for receiving the housing construction premium
+ Minimum age 16 years
+ Annual payment into the building society contract of at least EUR 50
+ Minimum term of seven years
+ Taxable annual income less than EUR 35,000 (single person) or EUR 70,000 (couple)
You receive the subsidy as a grant and do not have to make any repayments. For young families and low-income earners, the housing construction premium is an important form of state support for investing in a property in the medium or long term.
How high is the housing construction premium?
The amount of the housing construction premium is ten percent of the contributions that you pay into your home loan and savings contract within one year. You must also invest at least EUR 50 per year. Please note that the subsidy is capped. The cap is EUR 700 for single people and EUR 1,400 for couples. Single people can therefore receive EUR 70 per year, couples EUR 140 per year.
How do I get the subsidy from the housing construction premium?
You must apply for the housing construction premium; it is not paid out automatically. You have the option of submitting the application to the building society with which you have concluded the building society contract. The relevant application will be sent to you with the annual statement. This is valid for the past year. You complete the application and submit it to the building society. You repeat this procedure every year. It is important for you to know that the payout is not automatic. The premium is credited to the building society contract. A retroactive application is possible for a period of two years.
The employee savings allowance as a state subsidy for the purchase of condominiums
In addition to the housing construction premium, you can also claim the employee savings allowance. This requires an employer who offers capital-forming benefits. You use these benefits for housing purposes, for example by paying into a home loan and savings contract. In this case, you are entitled to the employee savings allowance. If you are self-employed or self-employed or if you are not in employment, you are not entitled to the allowance. Please also note the income limits: Annual taxable income must not exceed the amount of EUR 17,900 for single persons and EUR 35,800 for couples. Entitlement to the employee savings allowance begins at the end of each calendar year.
How high is the employee savings allowance?
The amount of the employee savings allowance is nine percent of the amounts you have invested as capital-forming benefits. The upper limit of the eligible deposit is EUR 470 for single persons and EUR 940 for couples.
How can I apply for the employee savings allowance?
You apply for the employee savings allowance when you submit your income tax return to the tax office. In this declaration, it is sufficient for you to put a cross next to the application. You can apply retrospectively for up to four calendar years. As an alternative to the income tax return, you have the option of submitting a separate application. Please note that you must provide the tax office with a corresponding certificate from the institution where you deposited the respective amounts.
Conclusion
If you buy residential property, you can claim subsidies from the state. Various offers are available to you. These are provided by the state, but also by the individual federal states. It is important for you to know that individual subsidies are not mutually exclusive. For you, this means that you can take advantage of several subsidies. These can be granted as a favorable loan or as a grant. You often do not have to repay the grant.
The offers differ in details. Sometimes they are tailored to specific people or groups. Other offers relate to the building. For example, you may receive a special grant for an energy-saving house.
Check offers comprehensively
The large number of offers can be reissued every year and awarded by different institutions. Our overview therefore does not claim to be exhaustive. You should not use it as your only source of information, but rather seek out a variety of sources. Study each funding offer in detail and compare the offers with each other. This will enable you to plan effective and secure financing for the purchase of your property. Take great care when planning. Equity and a financial buffer are essential criteria to ensure that you can manage the financing even in difficult times. Always check whether you can take advantage of a state subsidy. You save costs because the entire financing is cheaper thanks to the subsidies. This applies to the purchase of properties, but also to new builds. Depending on the size and features of the property, the cost savings can be very significant.
